Sri Lankan Economy Snapshot – March 2018

GDP Growth: Sri Lanka’s per Capita GDP surpassed $4,000 during 2017. According to the provisional data released by the Department of Census and Statistics, Sri Lanka grew 3.1% in 2017 with per Capita GDP at $4,065.

Annual growth recorded a slowdown in 2017, compared to the 4.5% recorded in 2016 driven by a contraction in the Agriculture sector while growth in the Services and Industry sector moderated. There was a notable downward revision in previously released data for the first three quarters.

Exports: For the 6th consecutive month in 2017 export earnings recorded a double-digit growth in December 2017. This was driven by the increase in exports of textiles and garments as it recorded the highest monthly earnings for 2017 in December. For the full year 2017, Sri Lanka’s exports recorded an all-time high of USD 11.4bn which is a growth of 10% compared to 2016.

Imports: For the first time in 2017, expenditure on earnings surpassed the USD 2bn mark in December. This was led by imports of fuel owing to increased prices and import volumes. Importation of rice increased further in December to fulfill the shortage in the domestic market. For the full year 2017, Sri Lanka recorded the highest ever import bill of USD 21Bn largely led by higher imports of fuel and rice.

Trade Balance & BOP: The deficit in the trade account expanded in December 2017 exceeding the USD 1bn mark for the first time since November 2012. Trade deficit for the full year 2017 also increased mainly due to higher import expenditure incurred by weather related factors, offsetting the notable increase in export earnings. Despite this, improved performance in the financial account enabled the BOP to record a surplus of USD 2Bn.

Inflation: CCPI headline inflation recorded a decline in February 2018 to 4.5% from 5.8% in January while CCPI core inflation remained unchanged. NCPI headline inflation for February 2018 declined to 3.2% from 5.4% in the
previous month. NCPI Core inflation fell marginally to 2.0% from 2.1%.

FDI Inflows: Sri Lanka recorded the highest ever FDI inflows in 2017 (USD 1,710mn), growing by more than two times compared to the inflows in 2016.

IMF Article IV Mission & 4th EFF Program Review: The review which concluded in the early half of March saw the IMF staff team expecting the economic recovery to continue while acknowledging that though reforms have progressed under the program, the economy remains vulnerable to shocks